Pros / This is one of the most well-known and trusted names in online banking.

Cons / The bank is not a member FDIC and not insured by the government.

 Verdict / We recommend this bank for online shopping.

Editor’s Note: This product has been removed from our side-by-side comparison because it has been replaced by another product. You can still read our original review below, but Top Ten Reviews is no longer updating this product’s information.

PayPal is nearly as universal as Google or Amazon. This online bank has developed a following for its secure and easy transactions online. However, PayPal also offers a savings and checking account of sorts. You can store money in the bank and with the ATM/debit card you can even earn rewards redeemable with PayPal accounts as you use the card. However, it is a very nontraditional checking account because it uses a checking card, but not checks. Also, PayPal is not a member FDIC, which means that the money you deposit in the account is not backed by the government. Many other online banking services are insured by the government so that if it fails, your deposits are protected up to $250,000.

When selecting an online banking service, PayPal is often the most recognizable name. Its accounts are accepted by virtually every online vendor and it is nearly synonymous with online shopping. When you are setting up an account with PayPal, you do not have to worry about any monthly minimums or deposits. There are no fees associated with the accounts, which makes it very simple to manage.

Just like other, more traditional banks, you can deposit funds in a variety of ways. Online transfers, checking information, money orders and direct deposits are all ways to get money into this online banking service.

After you sign up for the checking account, you will be able to request an ATM/debit card. This card functions much like other similar cards that are issued from other traditional banks. However, with the PayPal account, you can use your purchases to earn rewards redeemable with your online banking account. The rewards vary and can be adjusted depending on the account.

This internet-only bank does not offer any checks with their checking account. The debit and ATM card functions similar to other similar online banking services’ checking accounts, but the lack of checks could be distracting to some.

Depositing money and using a PayPal account as a place to store money is very simple. However, there are no interest-gaining options or any money-market investment options. You cannot diversify your investments because there are no advanced savings options. However, if you are looking for a place to store funds that can be used at almost any online shopping location quickly and easily, PayPal is one of the best and most attractive online banking services.

There’s no doubt that PayPal has one of the best reputations when it comes to secure online transactions. However, when you are looking to do any large investments or deposit large amounts of money, PayPal may not be the best choice. Most online banking services are insured through the federal government so that deposits up to $250,000 are protected. PayPal does not have that insurance and protection.

When you need customer assistance from PayPal, you can use a toll-free telephone number or email address. When we had questions and concerns, we were able to find quick answers from the customer service.


PayPal is one of the most well-known online banking services online. It has a modified checking account; complete with a debit card that offers PayPal rewards. However, it does not offer any checks and it does not have complete and comprehensive insurance from the government.

***How we formulate the Benchmark Data:

Under the Benchmark tab labeled "Online Banks' Interest Rates," you will find the basic interest rate paid on a savings account for new customers. This number is not static and will change based on the amount you deposit, your current balance and special promotions the bank might be having. The interest rate we have displayed was obtained by contacting the bank to evaluate the interest rate on a new account with the lowest possible minimum balance.

The second Benchmark tab, "Online Bank Interest Rates Compared to Major Banks," is a computation of the interest rate found at the online bank, as above, and divided by the average rate of major “brick and mortar” banks. The average interest earnings for these banks is currently calculated as .05%, and was derived by contacting the three major banks (Wells Fargo, Bank of America, and Chase), and averaging their interest earnings rate for a similar account.

The Benchmark values found under this tab represent the ratio of each online bank's interest rate to .05% (the brick and mortar average). The value you see here is a product of that ratio, which is obtained by dividing the estimated interest rate found at online banks (the values in the first tab) by the average interest rate of the brick and mortar banks (.05). The banks that feature a larger Benchmark number than competing banks in our review provide a proportionately higher interest earnings rate on savings. The data used to compute these values is current as of October 2011.